Central Bank Meetings in Focus

Price action in USDJPY has become frustratingly congested recently with the market trapped in a tight range through August and early September. However, with both the Fed and BOJ meeting this week for their September rate-setting, there is potential for a directional move to help drive a fresh phase heading into Q4. The broad expectations this week is that the Fed will cut rates and signal the likelihood for further easing, while noting that inflation risks remain a threat to be monitored. Additionally, the BOJ is expected to keep rates on hold while retaining a more hawkish outlook, signalling the prospect of further tightening if needed near-term.

Fed & BOJ Expectations

If both central banks deliver as expected, this should see USDJPY trading lower near-term with USD vulnerable to a heavy sell off if the Fed signals further easing over Q4. Recent labour market weakness will be a key focus point and should the Fed sound alarmed over the dovish shift here, this will be a key driver of USD weakness. For the BOJ, traders will be looking to see how optimistic the BOJ remains over the Japanese economy weathering the storm of US tariffs. If Ueda focuses on domestic resilience, this should keep hopes of another rate hike alive, keeping JPY supported near-term and creating fresh, tradable divergence between USD and JPY.

Technical Views

USDJPY

For now, the pair remainder underpinned by the 146.81 level, with the bull trend line off YTD lows sitting just beneath. While this area holds as support, risks of a fresh break higher are still seen with 149.30 the first hurdle for bulls. Should we break lower, however, focus turns to 144.32 as first support to watch.